JERUSALEM, March 14 (Reuters) - The Bank of Israel said on Wednesday that banks must meet a core capital ratio of at least nine percent by the start of 2015 as part of the gradual process of adopting Basel III regulations.
Under the draft guidelines, the central bank imposed even tougher guidelines on Israel's two largest banks -- Leumi and Hapoalim -- with a minimum capital ratio of 10 percent, to be implemented by January 2017.
"This is an additional essential step in the strengthening of the banking system and supporting the stability of Israel's financial system. It is a measured step which allows continued growth of credit and of the economy," Bank of Israel Governor Stanley Fischer said in a statement.
The Bank of Israel's current core ratio of capital to risk minimum -- a measure of financial strength -- is 7.5 percent, with banks now averaging around 8 percent.
The central bank said banks are expected to increase their capital balances gradually, while continuing to support economic growth.
Banks will also be allowed to distribute dividends as long as doing so does not negatively impact their ability to meet the new requirements, the Bank of Israel said.
The new Basel III capital rules call for a core Tier 1 capital adequacy ratio of at least 7 percent starting in 2013. Full implementation is expected by 2019. (Reporting by Steven Scheer. Editing by Jane Merriman)